In other words, the government is using your money defend those who ran companies that have already cost you more than $150 billion in bailouts from the allegations of another government agency that’s using your money to sue them.

Those fees, by the way, come on top of hundreds of millions in other legal fees and indemnifications the government has spent both before and after the collapse of Fannie and Freddie. Rep. Randy Neugebauer, R-Lubbock, provided this detailed list of legal fees in January.

The bigger problem is that it creates a round-robin of risk, in which no matter what happens, taxpayers, not the executives, shoulder the risk. The root cause of the financial crisis is alive and well. As Stoller points out:

First of all, covering the legal liabilities of executives at corporations for misbehavior is a problematic risk shift. Second, when this happens at a bailed out company and the cost is actually borne by the taxpayer, it is an indication that regulators do not think it is problematic to encourage such irresponsible misbehavior.

So why is the FHFA paying the bills? Because when the government took over Fannie and Freddie, it didn’t rescind the legal protections afforded the executives when Fannie and Freddie were private companies. At the time, FHFA acting director Edward DeMarco argued that, even though the law allowed him to rescind the legal protections, paying the fees was standard practice and if the government cancelled the legal protections it might make it difficult to attract skilled employees to the companies. Of course, given the state of Fannie and Freddie, it’s pretty clear that was difficult with the legal protections as well.

But Fannie and Freddie aren’t public companies anymore, and its executives shouldn’t be entitled to the same contract terms they had in the private sector. In Washington, as on Wall Street, no one seems to understand that failure has a price.